An oral contract is an express or implied agreement which creates legal rights and obligations outlined or agreed to in spoken words. Generally, it is referred to as an informal contract due to the unwritten nature of this form of contract. Though, it is difficult to prove oral contracts, it is legally binding under Nigerian law; especially where there is a breach of contract. There is a breach of contract where a party, without legal excuse, fails to perform its obligations under the contract, whether written or oral.
Essentials of a contract
Just like a written contract, an oral contract must be valid to be legally binding on the parties. It must satisfy certain basic requirement in order to be enforceable. For an oral contract to be valid there must be an offer, an acceptance, a legal consideration and an intention to be legally bound.
An offer is an expression of readiness to contract on terms specified or implied by the offeror (one who makes an offer to another). An acceptance on the other hand is a reasonable assent, communicated by the offeree (a person to whom an offer to enter into contract is made) in agreement to the terms made in the offer.
While legal consideration, is some benefit received by a party who gives a promise or performs an act, or some detriment suffered by a party who receives the offer. It can also be referred to as the motive, price or impelling influence that induces a party to enter into a contract.
There must also be a clear intention to create legally binding relations, unequivocally expressed by both parties. The parties must have the legal capacity to contract because a person under 18 (eighteen) years of age cannot enter into a valid contract under Nigerian law.
A court is unlikely to uphold the terms of a contract which does not have the essential elements of a valid contract. Nevertheless, a contract made orally, without its terms being reduced to writing and signed by the parties can still be valid and binding. The real problem is establishing that a contract actually exists and its terms.
Proving an oral contract
In order to prove oral contract, the party that asserts the existence of such a contract is required to prove such fact by adducing credible evidence on the existence of the contract and its terms by;
(a) Written Communications;
Some form of communications may substantiate the oral contract between the parties. This include letters, email correspondence, text messages, receipts, photographs, notes, quotes, faxes, bills of quantities, evaluation and other communication in a written form.
(b) Conduct of the Parties;
Actions, behavior or circumstances of the parties involved can be shown to be proof of an existing contract. Indeed the conduct of parties may give life to an incomplete contract where their conducts or performance objectively show that the parties had an intention to be bound by contract.
(c) Reliable Verbal Testimony of any of the Parties;
A contract between parties can be established by their words of intention. For example, if a person walks inside a restaurant and orders for food and same is given to him then it is assumed that a binding oral contract has been entered. The party who demanded the food cannot refuse to pay for the food by claiming that the food is free or there is no written contract.
(d) Testimony of Third Parties;
In an instance where third parties were present when an oral contract was made between the parties or when the contract was performed, they third parties may testify to the existence or otherwise of the contract. The third parties can also give evidence on the terms of the contract.
(e) Proof of Execution of Obligations Under the Contract;
Where it is proved that a party has executed his or her obligations under a contract, a valid contract can be inferred between the parties. For example, if a person is promised some benefit to perform an act, when that party performs the act, this would establish a contract between the parties.
(f) Collection Attempts;
Attempts made to collect what is owed to a party may be proof of an existing contract between parties. This may include copies of demand notices for payment of outstanding debt, letters in respond to such notices, etc.
(g) Bounced Cheques and Unpaid Invoices;
Cheques that have been bounced for lack of funds in the issuers account and unpaid invoices are useful evidence to proof the existence of a contractual relationship between the parties. This is effective where one of the parties allege the non-existence of a contract.
(h) Evidence of Part Payment Effected;
Evidence of payment of a sum less than the whole amount owed is equally credible evidence to prove the existence of an oral contract.
Nonetheless, under Nigerian law, every contract for the sale of land, any contract which involves disposition of land (for example, land to be disposed by a Will, etc.), contract to enter into a Mortgage Agreement or charge on land as well as every contract requiring another person to answer for the debt of a third person must be made in writing. The law does not allow for these kinds of contracts to be entered orally.